University of Hawaii Responds to State Auditor's Report on UH Foundation

The State of Hawaiʻi Office of the Auditor recently released a report entitled "Audit of the University of Hawaiʻi Contract with the University of Hawaiʻi Foundation."

"This auditor‘s report relates to events that took place prior to 2003, but it does validate the current Board of Regents‘ perspective that the contract between the university and the Foundation is inadequate in that it neither protects the university‘s interests nor holds the Foundation accountable to the university," said Kitty Lagareta, vice chair of the UH Board of Regents. "The current BOR has been criticized for requiring more accountability from the Foundation and for declining to approve the latest contract with the Foundation. We believe that our issues and concerns have been validated by the state auditor‘s report."

"As it applies to the University of Hawaiʻi, the report provides valuable insight since the university is currently finalizing its Amended and Restated Service Agreement with the UH Foundation," said UH Chief of Staff Sam Callejo.

However, the university does not agree with all findings of the report, and submitted a response to that effect to the State Auditor.

The report raised questions about the specificity of contractual provisions between the university and the Foundation and about the relationship between the contract and a companion Memorandum of Understanding which was originally executed in 1997. It also questioned whether the contract between the university and the Foundation was negotiated and processed outside the university‘s procurement process. The report also raised concerns over the Foundation‘s relationship with the university, stating the operations of the Foundation were intertwined with the university.

In its response, the university clarified the design and purposes of the two pertinent documents, the contract between the university and the Foundation and the Memorandum of Understanding. The university also observed that the contract for services with the Foundation is statutorily exempt from the requirements of the state procurement code, and the contract did not fall within the requirements of a sole source procurement as alleged in the auditor‘s report.

The university argued that the Foundation operations are not intertwined with the university as it employs its own staff, has its own management structure, and has its own governing board, which is legally separate from the governing board for the university.

"The university continues to work diligently towards finalizing the amended and restated contract with the Foundation to provide better oversight of the Foundation and to require more detailed and complete reports. The university shares the goal of insuring the citizens of Hawaiʻi that the financial resources of the university, be they public dollars or private funds, are used wisely and appropriately," said Callejo.